CONFIDENTIAL
that our failure to draw the matter to the attention of D
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the Hong Kong authorities was to their detriment in that
for example it led to their buying more sterling than they
would otherwise have done in later months,, then this would
weaken our position in insisting on the more rigorous
interpretation. But although my grasp of the facts of the
situation is somewhat shaky I do not think that this was
the case.
The United Kingdom argument would be :-
(1) The critical words must be read in context and in the
light of the position as the UK understood it when she
drafted this gloss on her extended undertaking. The
modified settlement basis is not a bilateral agreement or
understanding but a unilateral statement of a condition
imposed by the UK in exchange for,agreeing to allow Hong
Kong to benefit from its own erroneous interpretation of
the word 'accidental'. Therefore it should be construed
primarily with reference to the UK understanding and there
is no reason for giving Hong Kong the benefit of the doubt
in case of ambiguity.
(2)
There is no doubt that as regards the original
accidental breach provision the intention was that if
accidental breach occurred the provision could be invoked
provided that the country in breach put itself above MSP
at the end of the following month. The content of this
requirement would vary according to what was happening
during that following month. Automatic variations such as
increases in stock market value or accruals of interest
should not be disregarded in assessing whether there was
likely to be a shortfall. The UK never intended that the
an ount to be purchased should be a purely academic
amount denigned, so to speak, to achieve MSP retrospectively.
ip